This article, by Patricia Adams, first appeared in the Financial Post

To deal with corporate crimes such as corruption, our federal government plans to introduce deferred prosecution agreements (DPAs) — arm-twisting mechanisms under which corporations agree to pay hefty fines and promise to mend their ways. As the government explains it in “Expanding Canada’s toolkit to address corporate wrongdoing,” a consultation that is now underway: “Under a DPA, criminal prosecution is suspended on the accused agreeing to fulfill certain requirements including admitting to facts that would support a conviction, paying a significant financial penalty and cooperating with authorities, on completion of which, charges will be withdrawn.”

DPAs became popular in the U.S. under the Obama administration, whose Department of Justice converted this seldom-used mechanism into a preferred method of dealing with corporate crime. With a DPA — a plea bargain of sorts — the government avoids costly and time-consuming trials that strain its resources. Instead, companies pony up fines that can reach hundreds of millions and even billions of dollars that government departments get to keep, adding to their ability to pursue other wrongdoers. Corporations also comply by submitting to case-specific conditions, which often involves executives reporting to in-house government “monitors” with vast power over business practices.

DPAs not only suit governments, they also suit corporate managers and directors. Instead of facing a criminal conviction and incarceration, its leaders are relieved of admitting to a crime and are spared a public shaming.

DPAs not only suit governments, they also suit corporate managers and directors

It’s win-win for the government and the corporate managers, but a loss for shareholders, who ultimately pay the fine. Shareholders lose even when the company is entirely innocent but, facing the bad press of a protracted trial and the cost of litigation, managers see the expediency of quietly negotiating a settlement. To date, 18 of the Fortune 100 have written a cheque to government agencies. Guilty or innocent, companies now see DPAs as merely another cost of doing business.

This cost of doing business is also a cost to the rule of law, because society loses the ability to strongly deter corporate crime. With the likely downside of bribery being a fine paid by the company, rather than time in jail, executives are likelier to take risks to land lucrative contracts.

The Trudeau government’s push for DPAs is born of good intentions, to remedy an earlier mistake, former prime minister Stephen Harper’s Integrity Regime, which was also born of good intentions. Under the Integrity Regime, companies convicted of a serious crime stood to be barred from government contracts for 10 years, a manageable penalty for some but a death sentence for companies that relied on government contracts for their existence.

This was the case with SNC-Lavalin, Canada’s largest engineering firm, after the RCMP charged it with corruption in 2015, raising the spectre of its demise following a conviction. SNC-Lavalin has since obtained a five-year reprieve. For now, at least, its 45,000 employees retain their jobs, its suppliers and customers retain their business relationships, pension funds and its other investors have their stock values somewhat restored and Canada retains the capabilities of one of the world’s leading engineering firms.

Through DPAs, it reasons, companies can be punished and rehabilitated without killing them

The DPA is the Trudeau government’s antidote to a too-blunt Integrity Regime. Through DPAs, it reasons, companies can be punished and rehabilitated without the collateral damage that would come of killing them. Yet DPAs have collateral damage of their own in failing to deter crime and, arguably, even in encouraging it: DPAs effectively decriminalize corporate crime by exchanging criminal charges for cash and compliance. Rather than sidestepping the Integrity Regime through DPAs, the Integrity Regime should simply allow for more discretion. The government should focus on punishing the individuals criminally at fault, rather than the company that employs them. The very notion that a legal contrivance called a corporation can be guilty of criminality is suspect — a corporation is merely a vehicle for business that cannot have a guilty mind.

Not surprisingly, the lobby for the DPA is led by SNC-Lavalin, which along with other corporations and corporate lobbies funded the Institute for Research on Public Policy to produce a roundtable report that concluded Canada needs a made-in Canada DPA to match the law in the U.S. and elsewhere. Yet DPAs may not last in the U.S. — they erode deterrence and “undermine the rule of law by depriving the (Department of Justice’s) legal arguments of meaningful testing in a judicial forum,” as then senator Jeff Sessions, now the U.S. attorney general, stated in expressing a view that may well prevail in the Trump administration.

Neither is there any evidence that DPAs enhance anything other than the budgets of government agencies. Once the Integrity Regime amends its existential threat to companies, no coherent reason remains for deferring the prosecution of wrongdoers.

Patricia Adams is the executive director of Probe International. She will discuss DPAs at Grounds for Thought in Toronto on Tuesday, Nov. 28 at 8 pm. Email: PatriciaAdams@probeinternational.org.